S/O What is middle class?

[Mackenzie Click-Mickelson]

I'm just saying that people never want the tax deductions THEY use to be eliminated only ones used by evil businesses or corporations. It's the same premise behind the "I'm definitely not upper class" even though your income shows you are in this country. Hard to tax them to death if you are one of them!

Hmm I guess I'm just different...before I moved into my house in Sep 2014 the ONLY tax deduction I took was a $2,500 student loan interest (which by the way didn't cover the full amount of interest that I owed) after I graduated and I suppose the $300 yearly charity donation counted too. When I was in college my student status was taken into account I suppose too but if you considered my annual income as a student I hovered around the poverty line...with the exception of my senior year...so yeah.

And I'm not using the words evil businesses or corporations geez.

 

[arminnie]

I wish more people just understood that choices in life have consequences. And many of those choices determine what kind of life one lives.

I grew up in EXTREME poverty. As I often describe it - not low income - quite often no income. Maternal family - sharecropper. Paternal - coal miner mostly unemployed. Very few people in my extended family graduated from high school - most didn't make it past the 9th grade.

By the time I was 12 I had to earn money for anything I got - including basics like toothpaste. I would babysit on school nights sometimes to 1 or 2 am - in middle school. I am really old so that was for 35 to 50 cents an hour.

But that motivated me to want to do better - so I made relatively good choices. I worked my behind off to get good grades. I did not have unprotected sex and get pregnant as a teen. I applied for scholarships and took loans to go to college. My choices were always predicated on how can I escape this horrible life. I was not LUCKY. I tried as much as possible to avoid bad choices.

I hate it when people ***** that their parents couldn't afford to send them to college as an excuse. My parents could not contribute a dime to my education. But I did get scholarship help. Others that I know who didn't took 1-2 courses at a time to finally get their degree. It was hard, hard work for them - but they did it. One of my cousins got her degree later in life as a single mother. It took her a decade to get that degree but she never gave up. I think what she did far out weighs my efforts.

I agree that it's not just about "working hard" - but making good choices in life helps a lot. Sometimes reality slaps one in the face. I worked in the oil industry in the 80s and lost EVERYTHING when it tanked. I had saved and saved and invested. At 40 I was not just dead broke but in debt from real estate up to my eyeballs. I had to take a job making 1/3 of my previous salary and start all over. But I did it.

I did not have the dot com sector to rescue me. I just finally got a moderately decent salary and saved, saved, saved.

I do have excellent academic credentials - but I have so many friends who do not. But they made good choices in life and have managed if not to become "uber wealthy" to have a good life. My BFF from 10th grade to now got married at 17 and started a family right away. She never went to college for a day. But she and her DH (also with no real education) probably have twice the money I have. But .neither of us judge people on their possessions.

Another friend of ours got divorced at 60 years old. She'd never finished college and ended up with very little money. She went back to school and became a nurse (at her advanced age). She's not rich now - but she has all she needs. Sometimes one just needs to figure out what is "enough".

I wish people focused less on "class" a person is and more on what a decent person is.

 

[crisi]

Of course good choices help - but neither good choices or hard work is sufficient.

Poor choices can take exceptional luck at talent and still create financial insecurity - ask lottery winners

And sometimes people make a single poor choice that isn't that big - but ends up dogging them. I've made poor choices, some of them could have been huge (my first marriage comes to mine) but have been able to shake them.

 

[cats mom]

Thanks for posting the link to the calculator.

I do find it interesting that $170,000 is considered upper income for a household of 4 in my area, and only 16% hit that mark, yet that income is definitely not going to support purchasing a house in an upper class neighborhood, not even in a middle class neighborhood. It might buy a condo, townhouse, low end SFR, or fixer-upper (if you could snag one before the house flippers get them all) but nothing more than that, at least using any sound financial rubric.

Of course said upper income household may have stacks of cash set aside for a down payment, although if this statistic is correct: "According to a 2016 GOBankingRates survey, 69% of Americans have less than $1,000 in their savings accounts. What's more, 34% have no savings at all." that would put them in yet another financial minority group, so I highly doubt most households have stacks of cash handy.

I guess most people go with the "wisdom" the first realtor I spoke with here spouted... You can't think of house prices in terms of real money, consider it funny money, get in however you can, and then you can start to refinance and draw back out. That does seem to be a lifestyle for many. I think many people who appear to live an upper income lifestyle are just pretenders.

 

[Mackenzie Click-Mickelson]

Thanks for posting the link to the calculator.

I do find it interesting that $170,000 is considered upper income for a household of 4 in my area, and only 16% hit that mark, yet that income is definitely not going to support purchasing a house in an upper class neighborhood, not even in a middle class neighborhood. It might buy a condo, townhouse, low end SFR, or fixer-upper (if you could snag one before the house flippers get them all) but nothing more than that, at least using any sound financial rubric.

Of course said upper income household may have stacks of cash set aside for a down payment, although if this statistic is correct: "According to a 2016 GOBankingRates survey, 69% of Americans have less than $1,000 in their savings accounts. What's more, 34% have no savings at all." that would put them in yet another financial minority group, so I highly doubt most households have stacks of cash handy.

I guess most people go with the "wisdom" the first realtor I spoke with here spouted... You can't think of house prices in terms of real money, consider it funny money, get in however you can, and then you can start to refinance and draw back out. That does seem to be a lifestyle for many. I think many people who appear to live an upper income lifestyle are just pretenders.

Just curious what price range of homes you are speaking about that $170,000 income wouldn't get in your particular area?

 

[cats mom]

Just curious what price range of homes you are speaking about that $170,000 income wouldn't get in your particular area?

Orange County, CA

From an old article because it's what I have handy. I'm sure the numbers are even worse now.

"CAR measures affordability as the percentage of households that can afford to buy a median-priced home. Just 20 percent of Orange County households met that affordability criterion in the third quarter of 2015. Affordability is projected to drop in 2016."

Back then Orange County’s median price for an existing single-family home was in the $729,000 to $754,000 range. I'm sure it's higher now, and that median price is NOT going to get you in a particularly nice neighborhood.

A house we used to live in (so I know it well) just sold for 1.1 million. Nice neighborhood, but basic tract home, builder grade everything, no updates since built 22 years ago. The new owners are planning on gutting it and starting over, which will cost a fortune, in addition to the cool million they dropped on the house. Not an uncommon practice here.

 

[Mackenzie Click-Mickelson]

Orange County, CA

From an old article because it's what I have handy. I'm sure the numbers are even worse now.

"CAR measures affordability as the percentage of households that can afford to buy a median-priced home. Just 20 percent of Orange County households met that affordability criterion in the third quarter of 2015. Affordability is projected to drop in 2016."

Back then Orange County’s median price for an existing single-family home was in the $729,000 to $754,000 range. I'm sure it's higher now, and that median price is NOT going to get you in a particularly nice neighborhood.

A house we used to live in (so I know it well) just sold for 1.1 million. Nice neighborhood, but basic tract home, builder grade everything, no updates since built 22 years ago. The new owners are planning on gutting it and starting over, which will cost a fortune, in addition to the cool million they dropped on the house. Not an uncommon practice here.

Ah yes CA...say no more I can understand exactly what you are saying.

 

[DawnM]

I am considered upper class, but I think a simple salary-based tool is misleading. I have no pension and so I have to put a ton of money into retirement on my own. Someone else with a lower salary, but a pension, might actually have more available money to spend than I do. If I remove the amount I dump into retirement each year, I drop down into middle class.

You have a point. And pension and health insurance in retirement are HUGE benefits if you can get them. If I added that all in there, and those numbers aren't on my check.

 

[DawnM]

It says I am in the top 20%, but it sure doesn't feel like it. So many have much nicer homes than we do. I am going to assume they are in the top 5% or massively in debt.

And I am fortunate, I have a retirement plan.

We are moving to a higher COL area, and housing will be tough, but my retirement is wrapped up in my previous location and I want to get back there for the highest retirement benefits.

 

[a742246]

If you have good health and a good attitude and a good work ethic, you have everything you need to be happy. That is what I would call a rich life! More valuable than any upper class label that people strive for.

 

[DawnM]

If you have good health and a good attitude and a good work ethic, you have everything you need to be happy. That is what I would call a rich life! More valuable than any upper class label that people strive for.

I don't think anyone is arguing that health and a positive lifestyle is any less important, but you need to eat and pay the bills too. If that isn't a huge hardship, it sure makes life easier.

 

[CalDisneyMomof2]

Orange County, CA

From an old article because it's what I have handy. I'm sure the numbers are even worse now.

"CAR measures affordability as the percentage of households that can afford to buy a median-priced home. Just 20 percent of Orange County households met that affordability criterion in the third quarter of 2015. Affordability is projected to drop in 2016."

Back then Orange County’s median price for an existing single-family home was in the $729,000 to $754,000 range. I'm sure it's higher now, and that median price is NOT going to get you in a particularly nice neighborhood.

A house we used to live in (so I know it well) just sold for 1.1 million. Nice neighborhood, but basic tract home, builder grade everything, no updates since built 22 years ago. The new owners are planning on gutting it and starting over, which will cost a fortune, in addition to the cool million they dropped on the house. Not an uncommon practice here.

We are in Brea. I'd say most of Brea is far from a bad neighborhood. Our 2,105 Sq Ft. home on 7,000 sq ft lot is worth but $720,000. A household of 4 with $170,000 could easily afford to purchase a home here.

 

[TwoMisfits]

We are in Brea. I'd say most of Brea is far from a bad neighborhood. Our 2,105 Sq Ft. home on 7,000 sq ft lot is worth but $720,000. A household of 4 with $170,000 could easily afford to purchase a home here.

Easily...not really. The old adage was to never buy a house worth more than 3x-4x your salary. That would make $510K-$680K the range for that person to buy a house, so they probably would be pretty stretched trying to buy a house like yours.

 

[CalDisneyMomof2]

Easily...not really. The old adage was to never buy a house worth more than 3x-4x your salary. That would make $510K-$680K the range for that person to buy a house, so they probably would be pretty stretched trying to buy a house like yours.

The old adage does not compare to the new; not to exceed 36% of gross income. $720,000 would be on the low end for someone making $170,000 assuming a 20% down payment is used. All the calculators I've used say someone making $170,000 could afford nearly a $1mil house. Not to say that's the best idea, but it's within that 36% gross range. I wouldn't personally stretch my budget that far but $720,000 wouldn't be an issue for someone making $170k. It ends up being about 23% of the gross income, much lower than the 36% range recommended to stay under.

For the record, we are nowhere near that $170k and we get by just fine. Mind you, we bought our house over 4 years ago. We're at about 26% of our gross spent on our mortgage/taxes/insurance.

 

[QueenIsabella]

The old adage does not compare to the new; not to exceed 36% of gross income. $720,000 would be on the low end for someone making $170,000 assuming a 20% down payment is used. All the calculators I've used say someone making $170,000 could afford nearly a $1mil house. Not to say that's the best idea, but it's within that 36% gross range. I wouldn't personally stretch my budget that far but $720,000 wouldn't be an issue for someone making $170k. It ends up being about 23% of the gross income, much lower than the 36% range recommended to stay under.

For the record, we are nowhere near that $170k and we get by just fine. Mind you, we bought our house over 4 years ago. We're at about 26% of our gross spent on our mortgage/taxes/insurance.

You'd be a fool to go by that standard for determining how much house you can afford. Through the years, DH and I have bought 4 houses. Each time, we bought way less than we were told we could "afford". Believe me, we sure didn't feel like we could have gone a lot higher on mortgage payments. The 36% number is based on you paying the minimum on your credit card bills each month, and living off ramen. I realize in some areas, you don't have a lot of choice, housing prices are insane. But just because the bank is willing to lend you X, doesn't mean it's a good idea to borrow it.

 

[CalDisneyMomof2]

You'd be a fool to go by that standard for determining how much house you can afford. Through the years, DH and I have bought 4 houses. Each time, we bought way less than we were told we could "afford". Believe me, we sure didn't feel like we could have gone a lot higher on mortgage payments. The 36% number is based on you paying the minimum on your credit card bills each month, and living off ramen. I realize in some areas, you don't have a lot of choice, housing prices are insane. But just because the bank is willing to lend you X, doesn't mean it's a good idea to borrow it.

I agree, which is why I said I'd never do it myself. But I don't believe 23% is nearly as bad. Which is what someone making $170k would be at for paying a mortgage buying my house at market price (inclusive of taxes and insurance with a 20% down payment).

 

[TwoMisfits]

36% is gonna get us in another housing crisis...rule of thumb I still see everywhere on the internet from all financial advisers is a MAX of 28%...

And assuming the 20% down payment on that expensive a house when someone is only making $170K is unrealistic. They'd need to bring $140K to the table and few people have the ability to save for that, especially with 2 kids in midlife (without raiding retirement accounts or stopping college funds).

Most calculators I've seen say that person should stay around $730K max, assuming very little other personal debt. If they have college debt or credit card debt, they'd likely have to be under b/c the 36% you cite is the recommendation for the max % of all monthly debt payments...and what young folks don't have college loan debt these days (especially among those making the high salaries these days)...

 

[CalDisneyMomof2]

36% is gonna get us in another housing crisis...rule of thumb I still see everywhere on the internet from all financial advisers is a MAX of 28%...

And assuming the 20% down payment on that expensive a house when someone is only making $170K is unrealistic. They'd need to bring $140K to the table and few people have the ability to save for that, especially with 2 kids in midlife (without raiding retirement accounts or stopping college funds).

Most calculators I've seen say that person should stay around $730K max, assuming very little other personal debt. If they have college debt or credit card debt, they'd likely have to be under b/c the 36% you cite is the recommendation for the max % of all monthly debt payments...and what young folks don't have college loan debt these days (especially among those making the high salaries these days)...

I think we're both assuming here. I was assuming NOT first time home buyer. Someone who is not a first time home buyer will have equity to put that 20% down.

You're also assuming student debt or debt in general. We have zero student debt. I went to a trade school. DH didn't go to college (we're not quite midlife). Other than one car payment and mortgage we have no debt - and the car we owe on, we have equity in. Not everyone has debt.

 

[DaisyJ]

We are in Brea. I'd say most of Brea is far from a bad neighborhood. Our 2,105 Sq Ft. home on 7,000 sq ft lot is worth but $720,000. A household of 4 with $170,000 could easily afford to purchase a home here.

We make more than that and are considered upper class according to the calculator and there is no way we could afford a $720,000 house! The only debt we have is our mortgage, so it isn't like we are drowning in debt, either.

 

[TwoMisfits]

I think we're both assuming here. I was assuming NOT first time home buyer. Someone who is not a first time home buyer will have equity to put that 20% down.

You're also assuming student debt or debt in general. We have zero student debt. I went to a trade school. DH didn't go to college (we're not quite midlife). Other than one car payment and mortgage we have no debt - and the car we owe on, we have equity in. Not everyone has debt.

I'm assuming average CA buyer - you are assuming yourself. Most average people now carry both CC debt and college loan debt. Most also have to save for kid tuition. Even if not a 1st time buyer, most do not get $140K equity out of their 1st home to put towards a new one, especially when moving from an even smaller, less desired home to a nicer one. Most have very little savings, even with retirement included. For folks to buy these houses, they are probably not doing the old "80/20" loans for 30 years - they are doing all those new 40/50 year loans and/or balloon payment loans, and putting 5-10% down max. Thus, they will then also be eating PMI for years...

These homes are not truly affordable for them...not unless they are planning to use them as apartments that they eventually give up making about $0 on the sale (since they will have paid down so little and houses can only go up so much more at those salaries)...